This paper examines the welfare implications of non-discriminatory
tariff reforms by a subset of countries, which we term a non-preferential trading
club. We show that there exist coordinated tariff reforms, accompanied
by appropriate income transfers between the member countries, that unambiguously
increase the welfare of these countries while leaving the welfare of
non-members unaltered. In terms of economic policy implications, our results
show that there exist regional, MFN-consistent arrangements that lead
to Pareto improvements in world welfare.
JEL code: F15.
Keywords: Trading clubs, non-preferential tariff reform, Kemp-Wan-Ohyama proposition.